Dynamic Responses to Labor Demand Shocks: Evidence from the Financial Industry in Delaware

75 Pages Posted: 28 Jun 2017

See all articles by Russell Weinstein

Russell Weinstein

University of Illinois at Urbana-Champaign - School of Labor & Employment Relations; University of Illinois at Urbana-Champaign - Department of Economics

Date Written: May 23, 2017

Abstract

This paper analyzes an important shock to local labor demand in the financial services sector: firm relocation to Delaware following a Supreme Court ruling and state legislation in the 1908s. Using synthetic controls and bordering states, I find significant effects on employment growth, the unemployment rate, and participation in the first decade. Employment spillovers to the nontradable sector and migration appear larger than estimates from shocks to the tradable sector. Effects persist for 10 to 20 years after Delaware loses its original policy-induced advantage. The shift towards a low unemployment sector explains this persistence, rather than direct productivity effects or agglomeration.

Keywords: Labor demand shocks, regulatory competition, migration, local labor markets

JEL Classification: R10, J20, G20

Suggested Citation

Weinstein, Russell, Dynamic Responses to Labor Demand Shocks: Evidence from the Financial Industry in Delaware (May 23, 2017). Available at SSRN: https://ssrn.com/abstract=2994039

Russell Weinstein (Contact Author)

University of Illinois at Urbana-Champaign - School of Labor & Employment Relations ( email )

504 East Armory Avenue
Champaign, IL 61820-6297
United States

HOME PAGE: http://publish.illinois.edu/RussellWeinstein

University of Illinois at Urbana-Champaign - Department of Economics ( email )

410 David Kinley Hall
1407 W. Gregory
Urbana, IL 61801
United States

HOME PAGE: http://publish.illinois.edu/RussellWeinstein

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